To identify and prioritize investment projects and changes in procedures in the natural gas supply and utilization system which would result in a decrease in greenhouse gas (GHG) emissions and would be part of a cost-effective GHG mitigation program for the Russian Federation.

b. Components

1. Assessment of the release of methane, and the development of mitigation programs for natural gas production, transmission, and distribution subsectors.

2. Assessment of GHG (primarily CO2) emissions from gas utilization and development of mitigation programs for the utilization subsector.These activities were to be undertaken in parallel with a Bank funded Gas Distribution and Energy Efficiency Project, with a total cost of $128 million.The project was the responsibility of the Ministry of Fuel and Energy (MoFE), with Gazprom as the implementing agency for Component 1 and a joint stock company (Investenergoeffect) was established by MoFE to undertake the implementation of Component 2.

c. Comments on Project Cost, Financing and Dates

GEF provided a grant of $3.2 million to cover the estimated foreign cost of the total cost of $3.7 million for the above components. Component 1, was to account for 75% of project cost and Component 2 25%.

3. Achievement of Relevant Objectives:

The component on reduction of methane gas emissions (75% of project cost) was not undertaken. The planned identification and appraisal of investment programs to decrease CO2 emissions from the gas utilization sub-sector (25% of project cost) was achieved in full. The regional investment programs are ongoing, and the activities initiated under this part of the project are judged likely to be to be sustained and expanded.

Gazprom never put in place a workable implementation arrangement for its component. On the other hand JSC performed satisfactorily and continues to operate.Overall the borrower failed to establish the required implementation arrangements, including administrative and financial management capacity agreed at appraisal, to fully achieve project objectives. The first component, comprising 75 percent of original project cost, was not implemented. Therefore, the borrower's performance is rated unsatisfactory and the overall outcome is also rated as unsatisfactory.

6. Ratings:

ICR

OED Review

Reason for Disagreement/Comments

Outcome:

Unsatisfactory

Moderately Unsatisfactory

The element of the project that was completed is not insignificant. It is rated as satisfactory and its sustainability is rated as likely.

Institutional Dev.:

Modest

Modest

Sustainability:

Likely

Likely

Bank Performance:

Satisfactory

Satisfactory

Borrower Perf.:

Unsatisfactory

Unsatisfactory

Quality of ICR:

Satisfactory

7. Lessons of Broad Applicablity:

In countries where implementation experience is limited, arrangements for interministerial cooperastion and provision of counterpart funds should be elaborated in legal documents and made effectiveness conditions

8. Audit Recommended? No

Why?

9. Comments on Quality of ICR:

The ICR provides a clear and fully satisfactory report on the outcome of the project.